YASH AGRO ENERGY LIMITED Vs. MAHARASHTRA ELECTRICITY

JUDGEMENT

(1.) YASH Agro Energy Limited, a company that operates biomass cogeneration plant in the district of Chandrapur in the State of Maharashtra preferred this appeal against the order dated 30.12.2010 passed by the Maharashtra Electricity Regulatory Commission, the respondent No. 2 herein,in case No. 24 of 2010 whereby it dismissed the claim of the appellant for compensation for loss on account of the breach of Energy Purchase Agreement (EPA) dated 25.10.2004 allegedly committed by Maharashtra State Electricity Distribution Company Ltd.(MSEDCL), the respondent No. 1 herein.

(2.) BEFORE setting up the generating plant, the appellant had entered into an EPA with the Maharashtra State Electricity Board, the predecessor in interest of the respondent No.l herein on 25.10.2004 pursuant to the orders dated 15.7.2002 and 16.8.2002 passed by the State Commission for promotion of cogeneration of electricity from non -conventional energy sources. In terms of the agreement the appellant was entitled to a tariff of Rs. 3.05 per KWH in case the appellant would opt to sell electrical energy to the Page 2 of 36 2 Appeal No. 20 of 2011 Board. There is a clause, 7.4 of the EPA that entitled the appellant to effect third party sale to any person provided such right was exercised by the appellant from the very beginning, i.e. prior to effecting sale to the respondent No.1. According to the appellant, the appellant opted to effect third party sale at the very beginning of the installation of the generation plant without commencing energy supply to the respondent No.1 who in case of such third party sale was required to allow open access because of the fact that the appellant's generation was connected to the grid of the respondent No.1. But the respondent No.1 by the order dated 21.5.2008 declined to consent to the appellant to effect third party sale and instead advised the appellant to inject electrical energy to the grid of the respondent No.1. This refusal led the appellant to file a petition, being No. 25 of 2008 before the State Commission some time in May, 2008 seeking redressal of the grievances. Even at that time the appellant's generating station was not yet ready for synchronization and commercial operation. At or about that time the appellant entered into an agreement with M/s. Reliance Energy Ltd. for sale of electricity upon commissioning the commercial operation of the plant and in terms of that agreement the appellant was entitled to a tariff of Rs.7/ - per KWH. But the Commission dismissed the petition on 8.8.2008 on the ground that Page 3 of 36 3 Appeal No. 20 of 2011 in terms of the EPA with the respondent No.1 the appellant was required to supply electrical energy to the respondent No. 1 without any option for the third party sale. This dismissal order led the appellant to prefer an appeal being 95 of 2008 before this Tribunal which by order dated 24.3.2009 allowed the appeal and set aside the order of the Commission dated 8.8.2008 holding that in terms of the EPA the appellant had a right to effect third party sale from the very beginning as a result of which the respondent No . 1 was without any jurisdiction to deny open access to the appellant so as to effect sale to the Reliance Energy Ltd. But in between, the Tribunal passed an interlocutory order on 10.9.2008 on the application of the appellant whereby it permitted the appellant to inject electricity from its 8 MW Biomass based Cogeneration Power Plant at Kolari and that in that case the respondent No.1 would pay as per the rates as may be specified by the MERC and this would be without prejudice to the rights and contentions of either of the parties to the appeal. According to the appellant, the allowance of the appeal had bolstered the appellant to claim and say that because of denial of open access by the Commission or MSEDCL the appellant suffered substantial loss of the difference between the tariff at which the MSEDCL was subjected to pay under the order of the Commission and the tariff Page 4 of 36 4 Appeal No. 20 of 2011 at which the appellant was entitled to supply to the Reliance Energy between the period from 15.9.2008 to 24.3.2009. The MSEDCL committed breach of the agreement and is thus liable to compensate the appellant for the loss caused on account of such action. The appellant sent a legal notice dated 12.2.2010 to the MSEDCL claiming compensation of Rs.6,02,15,775/ - together with interest @ 15% annum but in vain. Then again the Commission was approached by the appellant on 22.6.2010 through a petition being No.24 of 2010 under section 86(1) (f) of the Electricity Act praying for compensation with interest in the amount as was claimed in the legal notice. The Commission again dismissed the petition by the order dated 30.12.2010 on the ground that refusal of the MSEDCL to deny compensation was the outcome of erroneous interpretation or bonafide mistake in the understanding of the legal agreement. According to the appellant, the ground advanced by the Commission is far from being tenable because contractual right of a party flows from the agreement and in the event of the breach of the contract the party at whose interest the breach was committed is liable to pay compensation on account of such breach of the contract and the consequence of the breach of the contract follows from the law of contract and has not to be necessarily provided for in the agreement itself. The order of the Page 5 of 36 5 Appeal No. 20 of 2011 Tribunal dated 24.3.2009 passed in appeal No. 95 of 2008 did not create any fresh right in favour of the appellant but simply declared the rights available to the appellant under the law in the event of a party to the agreement committing a breach thereof.

(3.) THE respondent No. 1, Maharashtra State Electricity Distribution Co. Ltd. filed a counter affidavit justifying the order of the Commission which as respondent No. 2 in this appeal preferred not to file any counter in support of its decision. The appellant's claim for damages is completely frivolous and unfounded. The order dated 6.5.2008 passed by the Commission in case No. 93 of 2007 made the EPA , clause 7.4 to be invalid and unenforceable which led the respondent No.1 to refuse the request for third party sale by the letter dated 21.5.2008. The order dated 6.5.2008 passed in case No. 93 of 2007 remained in force till the Tribunal in its order dated 24.3.2009 limited the operation of the order only to the EPA to be executed in future and directed to give effect to the clause 7.4. of the EPA to the extent possible without violating the statutory provision. In the order dated 24.3.2009 the Tribunal did not find the respondent No .1 to be guilty of the breach of contract. The refusal of the respondent No. 1 to the effect that the appellant was not entitled to any third Page 6 of 36 6 Appeal No. 20 of 2011 party sale is based on the order of the Commission and the interpretation of the respondent No.1 in respect of the clause 7.4 is a bonafide interpretation. There was no breach of EPA. The electricity was injected into the grid pursuant to the interim order dated 10.9.2008 passed by this Tribunal and that order was only at the instance of the appellant through an interim application being IA No. 128 of 2008. No compensation can be awarded for any remote loss or damage sustained by reason of breach. The appellant has already recovered the tariff (cost plus reasonable return) for injecting electricity into the grid as per its own suggestion, as such the damages claimed by the appellant are damages in the nature of loss of remote profits not foreseeable by either of the parties at the time of entering into EPA. In fact, the appellant is seeking in the instant proceeding excess profit which is not permissible. Any compensation payable to the appellant by the respondent No. 1 would be tantamount to imposition of penalty only for acting in compliance with the orders dated 6.5.2008 and 8.8.2008 passed by the Commission and the order dated 10.9.2008 passed by the Tribunal.